HHJ Wilcox
- In a period of less than a year a redundant colliery site in Ayrshire with varying levels was transformed into a state of the art fully automated factory where virgin timber was fed in at one end and a sophisticated chipboard product emerged at the other. The Defendants proudly proclaimed that £33 million worth of sophisticated environmentally friendly plant had been installed into the factory producing a facility worth some £55 million.
- The imaginative scheme came into being as envisaged by the Defendants Egger and their then managing director Mr Gardner.
- The time devoted to the conception, planning and construction stands in stark contrast to the time thereafter devoted to the resolution of the many disputes arising from this complex and high speed project.
- The guaranteed maximum price originally stood at £12 million.
- The costs of resolving the disputes arising out of the project are said to amount to approximately £9 million.
- The amount of the claims recovered is a matter of dispute between the parties but on any reckoning is far less than half of the costs.
- There have been many hearings. Two trials of preliminary issues occurred. The first as to whether there was in fact a concluded agreement. The second as to the extent of the insurance obligation of the Defendant under the agreement as so found by Mr Recorder Black QC, in relation to the defective warehouse floor. Liability and quantum were tried separately and there have been a number of case management hearings and several visits to the Court of Appeal.
- The issues between the parties relate to the conduct and assessment of the extent of successful recovery.
- These two issues become inextricably interwoven at certain steps in the history of these claims.
- This case was about money. The dispute was between commercially sophisticated parties who throughout had access to professional advice, both technical and legal.
- The successful party is the one that emerges with a net payment of some substance in its favour:
"… In deciding who is the successful party the most important thing is to identify who is to pay money to the other. That is the surest indication of success and failure …"
- It is not the only measure of success since a consideration of the conduct of the parties obliges the court to evaluate the true cost of achieving that success. The conduct of a party may well make the cost of achieving a result disproportionate and also have the consequence of making a case less likely to settle because of the incidence of both mounting costs and interest. A failure to be open handed, or candid, exaggeration, unwillingness to treat and delay are matters that may render costs disproportionate to the achieved result. Where fault is all one sided the costs outcome is straightforward. Where, as in this case, there are faults on both sides a robust account must be struck and the effect upon the course and conduct of the litigation considered.
- The litigation in this case has exhibited many of the features that the CPR regime sought to cure.
- The Construction and Engineering Protocol was not in force at the time that these disputes emerged.
- Egger's administration of the contract was such that the necessary co-operation and contemporary open handedness during the currency of the project works was never forthcoming. This was principally due to the under resourcing of the administration, and the perception of the GMP contract held by Mr Gardner, Egger's managing director who had no concept of the difference between changes under the contract giving rise to an entitlement to additional monies and design development which did not.
- Mr Gardner's views were sufficiently strong to affect the expert evidence and to be reflected in the positions later taken by the costs consultants, Turner & Townsend, often, it became apparent, against their better and privately expressed judgment.
- Egger's failure to properly administer the contract by dealing with vital matters such as RODs and applications for extensions of time led to a hardening of attitude by SCL who were ultimately driven to accept an absurd view of events asserting that there was no concluded agreement and that on valuation 14, on a contract analogous basis, their total entitlement for the project was just under £27 million.
- Throughout the course of litigation there had been little softening of attitude by the parties despite the very best endeavours of their legal representatives and certain experts expressing their robust and independent views.
- Egger's approach was epitomised when the draft quantum judgment was published, substantial sums were awarded both on the claim and the counterclaim, pence were rounded up or down as was appropriate. Egger sought to insist that the pence should be reinstated, as was their very strict entitlement.
- The following provisions are relevant to the exercise of the court's discretion and circumstances to be taken into account when exercising its discretion as to costs. Under Part 44.3(1):
"(1) The court has a discretion as to:
(a) where the costs are payable by one party to another;
(b) the amount of those costs; and
(c) when they are to be paid.
(2) If the court decides to make an order about costs -
(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
(b) the court may make a different order.
(4) In deciding what order if any to make about costs the court must have regard to all the circumstances including –
(a) the conduct of the parties;
(b) whether a party has succeeded on part of his case even if he has not been wholly successful; and
(c) any payment into court or admissible offer to settle made by a party which is drawn to the court's attention (whether or not made in accordance with Part 36).
(5) The conduct of the parties includes –
(a) conduct before, as well as during the proceedings and in particular the extent to which the parties followed any relevant pre-action protocol;
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended his case or a particular allegation or issue;
(d) whether a claimant who succeeded in his claim in whole or in part exaggerated his claim.
(6) Orders which the court may make under this rule include an order that a party must pay so far as relevant –
(a) a proportion of another party's costs;
(c) costs from a certain date."
- In the course of argument I indicated to the parties that if a costs order was appropriate it should be a percentage order. The issues bound up in certain aspects of the claim and counterclaim are difficult to disentangle and it would not be appropriate to consider the claim and counterclaim as two wholly separate events.
- The issues between the parties related principally to the respective conduct of each of the parties both pre litigation and post and the measure of success achieved in relation to the claims and the counterclaim pursued.
- I have had the benefit of analyses of time spent in court by each party pursuing or resisting each of the individual claims and counterclaims.
- Such analysis does not reflect the time spent by experts and legal professionals outside court which may result in the simplification of an issue leading to agreement or the limitation of the area of dispute. Thus the time spent in court bears no real relation to the true complexity and cost of resolving a particular claim. The time analysis is of limited value in this case.
- Mr Davies QC on behalf of Egger submitted that the court should not take account of interest when considering the extent of recovery because interest has "neutral effect". He contends that the amounts of interest bear relation to fortuitous events such as the raising and lowering of bank rates.
- In a commercial transaction or case interest cannot be ignored. It is one of the economic realities that affects the levels and risks of settlement, and it is a benefit that a recovering party may have been denied since the time that recovered monies properly became due. In this case SCL were additionally exposed to interest charges because they financed some of sub-contractor payments out of their own resources to the extent of approximately £1.2 million which was the subject of recovery. Egger had the benefit of those funds until the time of the final judgment.
- Value added tax forms part of the recovery but of course has to be accounted for by the Customs & Excise. It does not fall to be considered as part of the party's recovery.
- The quantum claims occupying the greatest time essentially fell into two parts. Firstly there is final account type claims, the H claims, and secondly loss and expense claims, the L claims.
- Each party has conducted a blow-by-blow account as to the history of each aspect of the issues comprising the individual claims, identifying the high and low watermarks for each claim and the level of denial or admission.
- Complex litigation where there are multiple claims embracing highly technical issues depending on expert evidence and delay analysis has a dynamic of its own.
- This is not a case to which the Construction and Engineering Protocol applied, neither did the provisions of the Housing Grants Construction and Regeneration Act 1996.
- Had they done so the posturing and failure of each party to co-operate at various stages would have been frustrated.
- The imperative of proper contract and administration by the Defendants would have been reinforced had swift references to adjudication been available during the currency of the contract. Mr Gardner and Mr Dent would have been unable to bury their heads in the sand by refusing to promptly consider RODs or EOTs or to properly use the professional resource of Turner & Townsend. SCL's claims would have been contemporaneously examined and investigated and then paid, or rejected in a reasoned way.
- As to a negotiated or commercial settlement the conduct of both parties rendered the possibility remote.
- Mr Davies on behalf of Egger in analysing the extent of individual claims at various stages of the litigation from the original interim claim stage to the high watermark of the contract analogous rate claim, down to that which obtained at the particulars of claim stage, thence after various amendments pre and post liability trial and finally following the liability judgment. He properly observed that when Mr Wishart, SCL's quantum's expert at the trial, came on the scene the level of many of SCL's claims substantially reduced. SCL clearly accepted Mr Wishart's advice and this was translated into the final amended pleadings.
- There is nothing that prevented Egger at any stage from safeguarding its position by making an offer or payment in. Whilst I am satisfied that at certain times SCL greatly exaggerated their claim Egger were not put in a position whereby they could not have protected their position had they chosen to do so. By way of example, as Mr Davies QC sought to demonstrate, in August of 1998 they had sufficient information of the H and L claims to make a commercial offer had they chosen to do so.
- I am satisfied that with the professional resources available to them, and from their own records, they could have made a well judged offer to settle at any stage of the litigation. I am satisfied that this is not a case wherein the defendant was disadvantaged by reason of an exaggerated claim so that he was misled as to the true nature and extent of the claim and his risk. Such a defendant would be prejudiced in attempting to make a well judged offer, or payment in.
- Clearly where a party does not have the resource and knowledge to ascertain the proper extent of a claim an exaggerated claim may cause the party to be misled and disadvantaged so far as judging whether a commercial settlement is desirable or achievable. This was not the case here.
- The counterpart of exaggeration is intransigence. In relation to the application for extensions of time until shortly before the liability trial Egger were adamant that none were due. Then a period of 14 days was admitted and a substantial claim for LADs was pursued. It formed a substantial part of the counterclaim. It had no real prospect of succeeding. Similarly in relation to the sub-contract claims during the quantum trial Egger pursued a misconceived and disproportionately expensive case on delay.
- Mr Davies QC invited a consideration of particular points in time and the level of claim then made and invited me to conclude that such exaggeration was fatal to settlement. He contrasted actual recovery against the state of claims at the high watermark.
- Such analyses may afford a brief snapshot of the state of affairs between the parties at the particular time. It is incumbent on the court however to look at the course of the litigation and to stand back and consider the effect of the parties conduct on each other and upon the course of an evolving dispute resolution process. It would be sad if a party acting reasonably and moderating its claims in the light of liability findings and robustly expressed independent advice should be discouraged from adopting a realistic view of its case.
- This is a case where the parties chose to have a separate liability and quantum trial, the forlorn hope being that resolution of liability issues would render a quantum trial unnecessary. In the light of the liability findings both parties had to recast their positions.
- The analyses and reconstructions are properly part of the advocate's armoury but in themselves are no substitute for a robust and dispassionate appraisal of all the matters to be considered by the court. They properly form part of the much greater and evolving picture that is represented by the claim identification, the joining of the dispute, its refinement and the ultimate resolution by the court.
- Egger submit they should be regarded as the real victors of the H claims. Mr Davies QC submits that the justification for such a conclusion stems from the "offer" made in August of 1998 based on their Costs consultants Turner & Townsend's assessment of the work packages which comprised the H section claims in SCL's Particulars of Claim. That report was furnished to Egger. A summary only was given to SCL. The detail of the report did not see the light of day until the liability trial.
- There is no warrant for describing it as "an offer". It was nothing of the sort. It was a report subject to a number of qualifications:
"1.2 Due to the limited amount of time available to complete the report it has not been possible to carry out an exhaustive examination of all packages, nonetheless we have addressed those of major financial significance. In the main, these are comprised in the packages which the contractor was permitted to execute direct using his own resources and the M and E services package which was sub-let to a specialist trade contractor.
3.1 In carrying out our assessment of the guaranteed maximum price we have considered "changes" in the E.R. as notified by Egger (Barony) Ltd."
- Clearly those matters considered by Egger to be design development and adjudged in the liability trial to be changes, were not included.
"Direct Works
Please note that sums in italics are broad brush figures where more detailed calculation has not been possible due to time constraints."
- There was no proper analysis of SCL's claims. Turner & Townsend had done the best they could under pressure of time but their report was incomplete and did not consider all heads of claim.
- I have considered Mr Gardner's analysis which purports to allocate sums awarded under the judgment against various works packages and in my view it is misconceived and inaccurate because it does not compare like with like.
- Both parties have made very detailed and lengthy submissions to me as to each of the claims making up the H claims, the L claims and the counterclaim.
- In deference to the conscientious submissions of each of the parties as to the component parts of the H, L claims and Counterclaim it is right that I should consider each of the claims since individually they form part of the much larger general picture that I must evaluate.
CLAIM H1 REMOVAL OF SPOIL
- Prior to the liability trial this claim was pleaded at £669,220 and a revision downwards from £858,152.
- On taking possession of the site Egger's preparation works were incomplete. SCL agreed to complete them by removing the overburden. During the currency of the project spoil was excavated and removed from site and the principal issue at the liability trial was the contractual responsibility for removal of spoil off site. Egger originally accepted the cost of the removal of overburden and the removal of excavated spoil associated with changes to the scope of works but denied throughout that there was any change of scope.
- The liability trial determined that Egger were liable for the costs of removing the overburden, double handling of all spoil and the handling and removal of the spoil caused by the changes.
- At the trial it became apparent that whilst Egger had during the contract maintained that there was no increase in the scope of work relating to spoil removal, they had nonetheless claimed monies from the Scottish Enterprise Ayrshire for completing the cost of site preparation. During the quantum trial Egger's Mr Gardner sought to go behind the agreements as to quantities reached by Mr Simper, Egger's quantum expert, and Mr Holloway SCL's quantum expert. The main area of contention during the quantum trial was as to rates, a limited quantity surveying issue. Ironically, Egger were successful in persuading the court to accept the modest rate analogous to that adopted by Mr Holloway and Mr Simper. SCL recovered £125,779.
- Egger successfully demonstrated that SCL's original claim in terms of rate was grossly optimistic and in relation to the overburden claim and agreed quantum issues that they (Egger) were prepared to pursue any argument however unattractive to defend the claim.
- I have considered the analysis put forward by Egger who maintained that they had difficulty in defending this claim and in understanding the manner in which SCL calculated the sums owing.
- The issues as to principle, quantities and rates were relatively straightforward, complicated only by the parties' preference for continued tactical skirmishing.
H2 LOG PARK DRAINAGE
- SCL claim that by reason of additional information provided by Egger after 19 April 1997 SCL were required to design and construct a different drainage system to that contemplated at contract. It was pleaded in the sum of £432,593. SCL contended that the Employer's Requirements required a system that treated the "first flush" of the run off waters from the log park only. The parties relied upon factual and expert evidence and the hearing of this relatively complex claim occupied a substantial amount of the hearing time, 4.6% according to Egger, 2.5% according to SCL.
- SCL lost this substantial claim. Egger were wholly successful in its defence.
H3 TEMPORARY FIRE FIGHTING
- Egger introduced a requirement for a Grecon and Minimax process water system. SCL contended that this resulted in a requirement for a second main and uprating of pipe work, and a requirement for a temporary fire fighting system. There was a further claim for consequential damage to a diesel pump. The claim was pleaded in the sum of £197,235.
- Egger's principal defence was that a second main formed part of the Employer's Requirements in any event and argued that the temporary system was only needed because of sub-contractor delay and that the diesel pump damage was caused by SCL's failure to hand over the system.
- At the liability trial the Claimant succeeded as to the requirements of a second main and the costs of the provision of a temporary fire fighting system.
- It was not proved that the diesel pump damage gave rise to any loss because of the insurance provisions governing the alleged loss and the fact that SCL had not handed over the system at the time the damage occurred.
- At the quantum trial the revised claim was £116,675, and the Defendant's value was £66,462.
- The court awarded £100,587. Throughout Egger were uncompromising and denied there was any entitlement. Litigation was inevitable by reason of the genuinely held views of the competing experts in the case.
H4A MACHINE BASES-SILOS
- This claim was pleaded originally in the sum of £215,812 and increased prior to the liability trial to £238,851.
- The original design and construction intention was to excavate down to the glacial till, back fill with compacted stone and then to form a concrete slab for the silo foundation. Information provided by Wolff in May of 1997, and information as to changed ground conditions gave rise to a different foundation design, namely a piled solution. The claim was for the cost of the piled solution with credit being given for the original foundation method, plus the cost of an additionally required silo.
- Egger valued the claim on the basis of one additional silo only at £15,811. The quantum experts in July 2001 agreed the cost to this at £28,132.
- It was acknowledged by the structural engineering experts that there had been changes in the loading and location requirements of the silos. The latter changes being the most relevant justifying a piled solution to minimise the risk of damage to already constructed adjoining foundations, in place of the slab solution. Saving in the cost of additional excavation and spoil removal made additional piling costs relatively modest.
- There was no need to adduce factual evidence and the expert's agreement was the basis of the successful resolution of this claim valued at £36,337, twice the amount originally conceded and considerably less than the claim. Egger submit this recovery may be said to be included in the £1.5 million payment made by Egger in addition to the GMP based figure, although in the absence of any sensible breakdown this would not be apparent.
H4B MACHINE BASES (OTHERS)
- The court found despite the absence of a positive case from Egger on the many changes which had occurred post tender to the machine bases that Egger's Mr Dent had clearly appreciated that there had been additional works instructed in relation to machine bases and ducting. Egger failed to provide final process plant foundation drawings in accordance with Clause 1.16.1 of the Employer's Requirements.
- The proper yardstick of assessing changes was the Employer's Requirements as at 17 April 1997, as supplemented by the detailed furnished on 1 and 27 May 1997 or shortly thereafter.
- Egger's case that there was sufficient information as to the thermal loadings for the press foundation was rejected.
- Following the liability judgment Egger amended its case and withdrew its admission in respect of the conveyer trench and pit. It admitted the claim at a revised lower sum of £30,297. SCL assessed it in the sum of £840,755 and in response, in March of 2003, Egger revised its position valuing the claim at £129,880 based upon a newly advanced positive case not hitherto disclosed. Egger's approach was that they were entitled to make as many revisions as they wished to machine bases by virtue of the provisions of Clause 1.16.1 of the Employer's Requirements. They were wrong and had been advised of a more appropriate approach by their experts Turner & Townsend in January of 1998.
- The expert input in relation to the final resolution of the quantum issues was significant.
- Both parties revised the levels of their claims and admissions but it is clear that Egger failed to face up to the reality that they owed substantial sums in relation to this head of claim until two days before the quantum trial got underway. SCL enjoyed substantial success in relation to this issue being awarded four times the sum admitted by Egger it is amended case.
H5A FOUNDATIONS, COLUMNS TO WORK SHOP, PRODUCTION HALL AND WAREHOUSE
- The AJSP Revised Layout Drawing changed the size of the warehouse and the production hall. Until the determination of the first preliminary issue Egger maintained that SCL's contractual obligation was to build to that drawing and thus no further sum was due. In the liability judgment it was noted that:
"This claim relates to the additional cost to foundations and steelwork. Egger in their pleading, make a limited admission in respect of the costs of the work to the Warehouse and the Production Hall. There was a substantial issue as to the cost of additional steel and concrete and design work. Professor Masterton and Mr Walsh whilst lengthy and heavily disputed evidence was being heard, quietly came to an agreement as to the proper effect of the instructed changes on the foundation and steelwork design. They have agreed the basis upon which they can assess the resulting revisions for the quantities and the method by which the financial effect of the changes can be ascertained."
- The experts in the event were very close in the valuations and pragmatically split the difference.
- The sum of £30,475 arguably had been paid to SCL prior to the issue of proceedings and that it may be said to be included in the £1.5 million paid over the £12 million GMP figure. Sadly that was not apparent or readily ascertainable because there was no production of a breakdown of the £1.5 million paid. Close handedness and a lack of candour prevents issues being properly identified and being dealt with either by further investigation, or by capitulation or offer.
- I regard honours as even in respect of this claim.
H5B GROUTING
- The claim was originally pleaded in the sum of £318,000, later revised to £290,205.
- Egger admitted liability and quantified the claim in the sum of £122,588.
- On 25 May 2001 Mr Holloway for SCL and Mr Simper for Egger valued it at £104,520. SCL had to come to court to establish liability and the amount agreed was less than the original admission, nonetheless there was substantial recovery through the court process. Egger contend that it must be the case that this sum was included in that paid over the GMP sum although not so identified. Egger submit that this issue standing alone in the light of such recovery would justify the payment by SCL of Egger's costs. I do not accept that to be the case but a realistic admission at the time it was made must warrant some credit to Egger when costs fall to be assessed, albeit that little time in court was spent upon the resolution of this issue.
H5C FOUNDATIONS: UNDERGROUND DUCTS
- A number of RODs recorded the requirements of Egger and its process contractors for installation of ducts which had not been shown on any tender drawings. Egger deny that it had required SCL to build anything additional to scope. Prior to the liability hearing SCL claimed the sum of £113,717 in respect of additional ducts that it maintained that it was required to construct by virtue of changes in the Employer's Requirements. Egger deny that SCL was entitled to any sum in respect of this claim maintaining that there were no instructions for additional ducts.
- The Defendant failed at the liability trial. In January 2003 SCL revised its valuation upwards to £120,372 of which the sum of £2,311 was ultimately admitted.
- Mr Wishart substantially moderated the SCL assessment to value putting it at £48,000. The court's award was £30,454. Egger maintained that the recovery was a mere 23% of the original claim and 26% of that in the amended particulars of claim. The resolution of this matter demonstrated Egger's consistent approach, considered throughout that by virtue of Clause 1.16.1 of the Employer's Requirements it was permitted to amend the scope of works without financial consequence, and thus originally denied the claims save as to a nominal amount.
- Were that to be the baseline SCL's recovery would be 1,317%.
- This simplistic percentage approach to recovery exemplifies very limited value. It ignores the larger picture. This claim and others serves to exemplify how Egger's misconceived view of the effect of Clause 1.16.1 clouded their vision and justified their view that in relation to such claims little or nothing was due, when cumulatively a great deal was properly in issue.
H6A STRUCTURAL STEELWORK: WAREHOUSE AND PRODUCTION HALL CHANGES
- The AJSP Revised Layout Drawing changed the size of the warehouse and production hall. Egger's stance throughout the contract and until the first preliminary issue was adjudicated was that it was SCL's obligation to build to that drawing and that no further monies were due. At the time of the liability trial in relation to hot rolled steel and location £358,033 was claimed, and in relation to cold rolled steel £33,891.
- Egger disputed the nature of the changes and the amount of the additional work involved and valued the claim at £131,001. Whilst lengthy and disputed evidence was being heard the experts by agreement were able to narrow the areas of dispute and recorded an agreement to undertake a 3D analysis to accurately ascertain the effect of change in the stanchion layout.
- SCL re-valued its claim at £274,231 and Egger revised its claim and produced the figure of £106,344.
- Following the quantum trial in the judgment it was concluded that:
"The experts on 13 November agreed to use sophisticated 3D computer technology to establish what it was in the circumstances confronting Lupton "a prudent economic design". Egger submitted that SCL should not be paid for the extra steel that was incorporated in the as built, because some years later, with more time and more sophisticated technology the experts established theoretically that it was possible to have done it with less steel. That is unreasonable as well as unattractive. I find that Professor Masterton's reasoning as to the justification of an additional uplift on the agreed theoretical minimum figure is compelling. The appropriate uplift in my judgment should be 2.5% giving an additional tonnage of 16.35 tonnes."
- Mr Davies QC on behalf of Egger submitted that "shortly prior to the quantum trial SCL put their case at £274,231. Following further agreements between the experts SCL were eventually successful in establishing that the sum of £229,104 was recoverable under this head. Taking account of the £131,001 which had already been paid and admitted by Egger the net amount "won" by SCL was £98,103".
- SCL were able to select a different basis for comparison asserting that SCL was substantially successful on their claim, it recovered £229,104 being 84% of that claimed at the outset of the quantum trial and more than double the sum admitted by Egger.
- The recovery was a substantial recovery and despite the assistance of the experts, when they exhibited genuine differences as to the extent of their final agreement, Egger sought to exploit this, as it was entitled to, to full measure. Its expert having expressed the view that the original design by Lupton was "prudent bearing in mind the circumstances of the project" nonetheless was unable to make any further allowance to reflect this. Thus, in my judgment, resource, expense and court time were fully utilised in the course of Egger's vigorous defence.
H6B STEEL WORK PROCESS STEEL WORK
- During the course of the project Egger's process contractors required the erection of steel work to aid the installation of the process equipment, particularly in relation to the resin blender, spreader and glue kitchen. In erecting their equipment the process installers had to modify and adapt steel work already erected by SCL. As a result this required remedial strengthening works by SCL. SCL claimed for this £370,753. Egger accepted a valuation of the claim of £211,207 as being the value of the claim.
- At the liability trial Professor Masterton on behalf of SCL sought to define the extent of change by reference to the tender and the as built documents.
- The Defendant's expert did not attempt this exercise. At the liability trial SCL were unsuccessful in relation to the resin blender part of the claim but it became apparent that Egger were at fault in providing the drawings late which became relevant to an EOT issue. This serves to demonstrate the dangers of endeavouring to assess issues discretely in a complex and many faceted trial such as this.
- At the quantum trial SCL revised their valuation down to £290,711. Egger's amended valuation was pleaded at £222,813. The claim was in fact valued at £229,000 representing a recovery of £55,000 in respect of part of the claim denied in its entirety by Egger but reflecting the QS rate for this steel work contended for by its expert.
- SCL argue that they were unable to identify or ascertain in the absence of any breakdown in the £1.5 million payment whether or how much was attributable to this head of loss. It serves to demonstrate that a lack of frankness and transparency by both sides makes a commercial appraisal of the claim very difficult.
H7A COMMON USER SURFACES: TEMPORARY HARDSTANDINGS
- During the course of the works SCL were requested by Egger to provide the areas of hardstanding for access and to accommodate process contractors.
- The claim was originally pleaded by reference to 33 RODs in the sum of £342,927. Egger accepted some additional work but maintain that SCL had assumed the responsibility to provide all hardstandings required by process workers. At the liability trial SCL withdrew its case in respect of 10 out of 37 RODs on which the claim was based. Egger admitted liability in respect of part of one ROD and the entirety of another.
- At the quantum trial 23 RODs remained. In ROD terms at the liability trial SCL succeeded on three RODs more than Egger. Such an analysis of the Claimant's position advanced in argument demonstrated how facile such an approach is. The money claimed at the outset of the quantum trial was still substantial, namely £223,517 and the Defendant's responsive evaluation was in the sum of £64,456. After the factual evidence was heard the Claimants expert revalued the claim at £129,644. The Defendants valuation broadly remained the same. SCL recovered £89,740. There was a great deal of evidence as to depth and absence of geotechnical membrane, but the recovered sum was substantial. Egger's defence to the issue was based on Mr Gardner's second hand evidence and that of Mr Dent, but mainly upon the skilful exposure in cross-examination of SCL's failure to prove its case in full.
- Had both parties been able to take a sensible commercial view this issue would have been either susceptible of settlement or swift resolution in court.
H7B COMMON USER SERVICES: REMOVAL OF RUBBISH
- SCL originally claimed £69,295 for the cost of clearing the rubbish which arose from Egger's sub-contractors' work, on an ongoing basis based on an instruction given on 24 September 1997 and specific RODs.
- Egger denied liability. The project manager's evidence was heard and in the judgment it was concluded:
"Mr Dent, Egger's project manager confirmed that the instruction had been given. He sought to make some distinction between waste emanating from process contractors which was within the contract and other waste which was of a type not foreseeable that was not. The distinction is specious and does not derive from the contract. The additional work covered therefore and subject to further instruction, provided it relates to rubbish, gives rise to additional payment."
- It was clear that Egger's position in part derived from their conduct in failing to perform the duties of project manager:
"SCL's claims were particularised in detail in each of the RODs. Egger had the opportunity to contemporaneously check the claims and if they were not made out, to respond in terms of denial or qualification. This was not done."
- In part however it was because of Egger's similar approach to other claims by not merely putting to proof but by advancing a positive case on the basis of Mr Gardner's strong belief, or mere theory without any sound evidential basis (see also H7A).
- Mr Philipson, a retired factory manager employed by Mr Gardner in the preparation of Egger's defence at the quantum trial, put forward an analysis of tip records and the claim was valued by Egger at £1,446.36. Egger had not pleaded an alternative case and were unable to prove one, but in attempting to do so exemplified their approach to these claims borne of an almost obsessive belief in the justification of their resistance sometimes in the face of clear evidence or without heed to commercial reality.
- Egger clearly attempted to go behind the findings at the liability trial. The recovery of £42,000 was substantial.
H8B M&E: COMPRESSED AIR
- SCL claimed £154,291 and were largely successful at the liability trial. By the time of the quantum trial SCL valued the claim at £123,284 and Egger at £97,535.
- The claim was proved in the sum of £122,631. Egger adopted the valuation of its expert Mr Simper who in turn based it upon an opinion of an M&E quantum expert Mr Emmerson. In the judgment the following observations were made:
"In the cross-examination referred to above [Emmerson] demonstrated the fallacy of his own argument. Depends upon a misinterpretation of Mr Taylor's evidence. Costs must be compared with cost not cost with price. Understandably Mr Simper who was not approached for a valuation of this claim on the Emmerson basis before, despite having time for mature reflection, nonetheless was tempted to leap onto a passing bandwagon thereby conferring benefit upon his client Egger. He was wrong. The proper approach I am satisfied is that of Mr Wishart, recapitulated in his cross-examination …"
- Mr Davies QC on behalf of Egger submits that the net amount "won" by SCL was £29,096 in the light of the admission by Egger that £93,535 in its final amendment was due.
- It was necessary to litigate in order to achieve the admission and the balance was hardly something that a commercial enterprise would be justified in writing off when the whole many faceted claim must be considered. Where there are very many claims as in this case it is the cumulative picture that must be considered commercially because the end figures may add up to a very considerable amount.
H8A PROCESS WATER
- This was a claim initially for £11,758 for the provision of cold water storage and the requirement to carry out a flow test. Egger denied liability. The issue was a conflict between the Employer's Requirements and the Contractor's Proposals.
- SCL in fact recovered £800 but lost the issue, it was not a matter that occupied a great deal of time either in or out of court.
H8C M&E FIRE MAIN
- SCL claimed the costs of £246,105 in respect of the cost of installing a second main. Egger's view was that this should have been installed as part of the Employer's Requirements and that £1,591 for additional pipes only was justified.
- At the liability trial SCL succeeded. By the time of the quantum trial the claim was revised to £203,561. In March Mr Gardner of Egger instructed Mr Hall to carry out a notional design for a single main and proceeded to obtain rates in order to price it. The object was to establish a notional albeit unagreed tender allowance to be set off against SCL's entitlement. Mr Emmerson, the M&E quantum expert employed by Turner & Townsend in giving evidence on behalf of Egger in cross-examination, made it clear that this exercise was driven by Mr Gardner. It was clear that it was not an approach to valuation that would have been initiated by an M&E quantum expert exercising his own independent professional judgment.
- The whole exercise was an indulgent time wasting and forlorn attempt to evade part of a just debt.
- The recovery under claim H8C was £171,181. Egger accept that in any event SCL were largely successful in this claim.
H9 INCREASE IN FEE AND COMMON USER SERVICE: INCREASED DESIGN WORK
- The increased design work claim related to the increased costs of carrying out additional design work, and design work which was disputed or required to be more complex than envisaged in the original specification or rendered abortive by subsequent change. On a zone-by-zone basis the total sum claimed was £204,153. This sum has been paid to Mott MacDonald the consultant design engineer. Against this deductions were made for sums within the L claims so that the total claimed was £55,982. Egger valued this claim at £12,215 whilst admitting liability.
- Since the claim was not in fact a prolongation claim the deducted amounts, based on the view that they fell within the L claims, was not warranted. SCL's quantum expert properly characterised the claim as recoverable under the H claims. The valuation he placed upon it, and adopted by SCL, was £176,330.
- In the quantum judgment it was observed:
"In their defence Egger admit that Mott MacDonald are entitled to an additional design fee by virtue of the changes to the GNP work or scope. At paragraph 292 of the defence they value the claim at £12,215. The rationale was provided by Mr Gardner in his evidence on day 8 at page 26 of the transcript. The sum was arrived at by taking all the elements of design work undertaken by Mott MacDonald and looking at the changes admitted by Egger and then making a pro rata adjustment reflecting that work based upon the GMP design fee. It follows that this approach does not reflect either the findings in the liability judgment or agreement between the experts."
- The recovery was substantial and the basis of Eggers resisting the claim difficult to see, particularly in the light of the commercial and generous way they were prepared to deal with the architects novated to SCL who were long standing associates of Egger.
H10 MINOR ITEMS: SCHEDULE 1
- Many of these items standing alone would not be considered minor in the accepted sense. In financial terms many were substantial. At the liability trial only items valued at over £10,000 were dealt with. Guidance was given to the scope of change entitling payment in the liability judgment:
"It is necessary in considering each of the minor items where the claimed value is in excess of £10,000 to consider the terms of each RDO, the context in which it was issued and the Employers Requirements as at 17 April 1997 and where appropriate in the light of Clause 1.16.1 which provides for the delivery of final and complete information in relation to various parts of the project by a specific date. As I observed earlier, such information may perfect the Employers Requirements, clothing bare bones requirements with particularity. The employer is not entitled by using this mechanism to go outside the design scope laid down in the agreement as at 17 April of 1997."
- The original claim valued all 1,700 minor items at £2,966,239 which were contained in 39 works packages.
- Egger admitted parts of the claim amounting to £580,231. The valuation experts Mr Holloway for SCL and Mr Simper for Egger evaluated many of these claims prior to the liability trial.
- The scheme of the contract involved the ROD system to record changes to the scope of work. Egger's failure to consider the RODs contemporaneously meant that when detail was considered the total ROD base claim was large and not easily susceptible to detailed investigation save on an expensive and difficult historical reconstruction basis. Egger's systematic neglect led to their inability to deal with this aspect of the claim in an economic and timely way. Had they operated the ROD system properly the vast and detailed minor items claim would not have seen the light of day. It would have been dealt with by the parties commercially and contemporaneously on the available and more easily accessible information.
- At the quantum trial Egger maintained its former position on the pleading although the experts worked diligently to reduce the areas of dispute. Egger agreed to produce a schedule of items remaining in dispute and the reason for disagreement but this sadly was not forthcoming. At the trial SCL's quantum expert valued minor items at £1,481,618 and Mr Simper for Egger had moved up to a valuation of £1,056,740.
- The cut off point for court determination at the quantum trial was £1,000. The total value found by the court of the H10 claims was £1,341,598.
- The investigation of minor items issues occupied a great deal of time and labour by the experts legal advisers and the court. The Claimant had to particularise each claim based upon each ROD and then await Egger's response to identify what sums were admitted and where the dispute lay. It made more difficult the commercial task of being able to consider where appropriate whether and if any sums had been paid against any specific claim. This did not contribute to the collaborative climate necessary for settlement. It forms part of the mutual responsibility the parties bear for the absence of proper opportunity for settlement and compromise.
H11 GROUND CONDITIONS
- This claim was added to the others at the time of the Amended Particulars of Claim. It was pleaded in the sum of £309,289.
- Egger denied the claim asserting that ground improvement measures were within the original scope of works and relied on their expert's view that the conditions were most likely attributable to SCL's use of the site. SCL's entitlement was considered at three categories: removal of "soft spots", ground improvement works relating to road and hardstanding where the Californian Bearing Ratio was less than 3%, and claimed additional excavation of poor ground material and the need for backfilling in the production hall to achieve 100 kN to 150 kN/m² for the foundations. SCL succeeded on each limb at the liability trial. The claim was revised downwards to £274,309 and then expanded to £385,458 SCL asserting that it reflected the use of additional stone to various locations. Egger maintained that the claim was worth £13,292. At the quantum hearing Egger developed an unpleaded case based on SCL's alleged responsibility to excavate to certain depths in any event on account of the presence of methane. This ingenious attempt to evade further payment was found to have no substance. Despite the poor quality of some documentary evidence SCL recovered £81,000. This was considerably more than Mr Simper's valuation for Egger of £13,292 but much less than SCL's £234,000 revised claim.
- SCL's original claim was clearly grossly over optimistic at the outset. Egger's conduct was not wholly acceptable at any stage. It is evident that because of their original stance that the works were within the contract that accommodation with SCL was unlikely on this issue.
H12 REPAIRS TO HYDRANT MAIN
- During 1999 six underground leaks were identified in the fire hydrant system. SCL undertook to repair the leaks on the express understanding that they would claim the cost from Egger if responsibility lay with Egger.
- SCL asserted that Egger had caused the leaks by reason of misuse of the system and Egger denied this asserting the leaks were in consequence of poor workmanship and design by SCL.
- Egger did not succeed and quantum was reserved. SCL valued the cost of repair at £114,305 re-assessing it at £106,118 after the liability trial. Egger did not propose a valuation. In its Amended Defence Egger continued to maintain that SCL were not entitled to any sums in respect of this claim. Egger put forward no positive case but as they were entitled to vigorously tested SCL's case on quantum reducing recovery to £92,516.
- It is a curious feature of the Defendant's conduct that they felt themselves unable to accept the consequence of the liability finding and the consequence that they had been found at fault in relation to the misuse of the system. Egger contends that SCL succeeded in recovering only 79% of the claim as originally pleaded.
L1 INCREASED MANAGEMENT FEE
- The determination of the H claims clearly governed the evaluation of the L claims.
- SCL's claim for an increased management fee depended upon a calculation pro rata of the allowance within the GMP against the additional measured works which at the liability trial was put at £864,921.
- By agreement the claim was put over until the quantum trial.
- Egger continued to deny that any sum was due basing its case on the view of its expert Mr Simper. The court found:
"Mr Simper's evidence was not impressive in relation to this claim. Because of pressure of time he had not appreciated that claim L1 also related to Common Users nor appreciated that Mr Wishart had stripped out, fixed and duplicated costs in arriving at an adjusted sum and he was cross-examined in the course of this trial. I am satisfied that Mr Wishart was conscientious in stripping out duplication and double recovery. The process of stripping out costs claimed elsewhere and fixed costs helped to ensure that only the items that are caused by the changed events relied upon or the delay and disruption fund remained."
- SCL were awarded additional Common User and management costs of 2.32% - £106,673.
- Egger submit that this recovery is only 12% of the original claim. The implication is that the original claim was grossly exaggerated. It was clearly based upon a misconception as to the inclusion of fixed costs, but since the issue was put off until the quantum trial where the proper basis of any uplift was identified the only consequence might be as to its effect upon any potential payment in or settlement. However since the parties had diametrically opposed views, Egger denying any entitlement its only effect might have been of frustrating the possibility of a commercial settlement. The conduct of these parties renders such a possibility extremely remote however.
L2 ADDITIONAL STAFF COSTS
- This as an L claim depended for its evaluation upon the determination of the values of the H claims. SCL's original claim was pleaded at £588,183, on a cost analogous basis. It was dealt with at the quantum trial.
- The cost information was supplied to Egger in August 2002. Egger contend that such information was late supplied and did not form part of the disclosed documentation. I am satisfied that on the pleaded case SCL had no strict obligation to furnish this documentation however desirable it would have been to give voluntary disclosure.
- There were clearly changes in the staffing levels that would have been evident to a prudent contract administrator.
- Egger's case was that the original staffing allowance arrived at by SCL was inadequate and additional staffing was not in consequence of Egger's breaches or changes rather because of SCL's failure to properly manage the project. Mr Simper valued extra staff in the sum of £99,687. SCL at £226,242 following Mr Wishart, its quantum expert's, analysis characterising costs incurred within the original contract period as being additional staff costs and those beyond as delay costs.
- It is apparent that Turner & Townsend, Egger's costs consultants, had information as to the additional staffing supplied to them during the contract, as the contract required. Egger were throughout therefore, aware of rates and the like and were in a reasonably informed position as to the burden of this claim. They are entitled to pursue a case that SCL were trying to pull the wool over the eyes of Turner & Townsend and the site based Mr Dent the project manager's representative and the assiduous Mr Gardner, even in the teeth of the evidence. They did, but did not succeed.
- I refer to a number of findings in the quantum judgment:
"344. It is well to remind oneself of the ambitious nature of this project. It was a fast track project of great complexity. It was administered in a way that caused significant delay and disruption and there were many significant changes.
345. SCL at the outset had sufficient managerial and supervisory capacity to undertake its task under the contract. The incompetence of Egger's contract administration and the lack of resource devoted to administration by Egger made it inevitable that demands upon SCL's management resources would become greater the management role greatly expand.
347. I reject Mr Simper's facile explanation that the tender allowance and the staff proposals were inadequate and that the proposals were a lot leaner there was no evidence before me that there was any waste of resource or misuse …
Egger submitted this must have increased the managerial burden on SCL themselves. The reasoning behind that assertion is flawed because there is no evidence in relation to these works that the organisation and the position of their separate sub-contracts were in any way different to those of the others. No cross-examination was directed to this matter. The only significant factors responsible for the additional staffing costs were those for which Egger were liable."
- The evidence in relation to the matters exemplified the hard-line position taken by Egger throughout. Whilst without doubt such resolve may have been fuelled by claim exaggeration by SCL it would perhaps have been profitable for Egger to have considered the armoury of safeguards afforded by offers for commercial settlement particularly in the light of the necessary implication of Mr Davies' submission that by August of 1998 Egger were in an informed position in relation to SCL's claims, albeit they did not vouchsafe the detail of this until the liability trial.
L3 DELAY COSTS
- SCL's original claim was that by virtue of their extended attendance on site there were prolongation costs totalling £580,342 for 18 weeks at a rate of £28,241.22 per week. It was a claim on a contract analogous basis. Egger conceded 22 weeks prolongation again based on a contract analogous basis.
- The proper basis was a costs basis. SCL accepted the advice of its quantum expert Mr Wishart who agreed with Mr Simper, Egger's expert, as to the proper basis of measurement. It was accepted that this L claim should go over to the quantum trial where SCL's claim was maintained at £427,661. SCL recovered £283,321. That element representing staff costs from June of 1998 until the December of 1998, namely £76,349 was not established in the light of the proper concession based on the characterisation of this part of the claim by Mr Wishart. Egger contended that this was another good example of figures which have been "seriously and solemnly put forward by SCL being later revealed to be, even on the logic of their own case significantly over stated". At the quantum trial SCL were unsuccessful in their first case based on contract analogous rates but successful in their second case, though not to the extent of the claimed sum of £427,661.
L5 INSURANCE
- SCL's claim was on the basis of additional costs. At the quantum trial Egger stated that SCL had failed to prove that they had incurred any additional charges under this head. In the alternative Egger submitted the appropriate percentage should be applied to the works was 0.72%, ie a percentage which reflects the agreed figure for insurance of £84,000 within the £12 million GMP.
- This was on a contract analogous basis. SCL's expert Mr Wishart calculated an insurance rate of 1.1% on a costs basis. In the judgment the contract analogous rate was followed giving a figure of 0.79%.
- This determination cannot be said to have occupied a great deal of time either in or out of court. In financial terms it represents an award much nearer to the contentions of Egger than those claimed by SCL.
L4 OVERHEAD AND PROFIT CLAIM
- SCL's position in relation to this claim was that a percentage uplift of 5.4% should be added to additional measured works and identified L claims. Egger denied any entitlement to overhead and profit; its expert Mr Simper in his view equated profit with on-cost which at £300,000 approximated to 2.5% of the GMP on a contract analogous basis. This became Egger's alternative case. SCL revised its claim upwards and based it on the revised view of Mr Wishart at 7.05% based on cost.
- The judgment award was an uplift of 2.5% which was closer to the Egger alternative position.
- The amount of time expended on this issue, which to a degree depended on the resolution of the H items, was modest. Egger's primary case was rejected but the award reflected a substantial reduction in the amount recovered once the percentage uplift was decided.
L6 SUB CONTRACTOR CLAIMS
- The claim was originally pleaded at £1,227,256 and by the quantum trial was revised downwards to £1,139,277.
- Egger submitted that of the claims advanced at the quantum trial SCL were unsuccessful in relation to two matters: the claim to Barr roads and paving (£28,000) and the NG Bailey costs of preparing the claim (£12,500) and that since SCL had been successful in relation to the large majority of this claim it was clearly a matter which militated in favour of SCL recovering the majority of costs associated with the item. This discrete claim was not dealt with in great detail at the liability trial. Egger chose not to address the issue of sub-contractors claim on its own or within a written statement dealing with delay.
- At paragraph 410 in the quantum judgment it was observed that:
"The parties must have been taken to have contemplated that in circumstances where the works were disrupted or prolonged, SCL would reach settlements with its sub-contractors on a broad commercial basis. It would not have been contemplated by either Egger or SCL that there would be an investigation as between SCL and its sub-contractors of the kind that might be carried out by a Judge or arbitrator particularly in the context of this maladministered contract. It is evident that SCL entered into commercial settlements when Egger and its professional quantity surveyor advisers Turner & Townsend, knowing of the difficulties that the sub-contractors were exposed to, by reason of Egger's default, chose not to be involved in the settlement process. I am satisfied that Mr Bradley kept Mr Dent fully in the picture as to the sub-contractors claims and as Mr Johnson of Turner & Townsend confirmed they were also kept appraised."
- The causes of delay were comprehensively dealt with by Mr Simpson of SCL in the summer of 2002. Egger were fully apprised of the extent and details of SCL's case.
- In July of 2002 Egger resisted an application to permit programming expert evidence for various reasons amongst which was that there was insufficient time for the evidence to be obtained. In November 2002 Egger sought to rely on expert programming evidence in relation to the whole extension of time claimed. It was refused but permission was given to call a Mr Pickavance to deal with the sub-contractors claims. To accommodate this the trial date was vacated.
- Egger's case was that SCL's entitlement under the heads of claim was nil. Prior to the quantum trial SCL reduced its valuation in relation to the sub-contractors Barr and NG Bailey from £900,000 to £797,000 based upon the expert analysis of Mr Wishart their quantum expert. The unchallenged evidence of Mr Bradley on behalf of SCL was that Egger was notified of many of the delaying events suffered by the sub-contractors and the claims made. As with RODs Egger did not take any interest in these claims.
- Mr Pickavance prepared and served a long and complex report warranting the service of detailed responses by SCL. A further report was served by Mr Pickavance, it could not be described as sensibly responsive to SCL's report. A further report was served by SCL indicating errors in the Pickavance report. Sadly this assistance was not heeded. Indeed Mr Pickavance's opinion expressed in his report was neither supported by the pleadings or the evidence.
- The evidence of Mr Pickavance generated a great deal of out of court time and expense and the subsequent hearing time was a red herring of little value.
- SCL's claim was maintained over the full five year period of the litigation during which Egger steadfastly maintained a denial to entitlement and then went to extraordinary lengths to pursue a positive and expensive case in support of its denials.
- In the light of the court's findings as to delay and the claim for LADs made in the liability trial Egger's conduct was both determined and intransigent.
COUNTERCLAIM A: WAREHOUSE SLAB
- The flooring of the giant warehouse was defective and cracks were noticed in late 1997. Some remedial works were later undertaken. The warehouse at the end of the automated line is the storage and distribution hub of the factory. From the stored board stacks large lorries are loaded. The process is a continuous process and any remedial or replacement works represent a clear and foreseeable interruption of business.
- SCL raised one substantive point in their defence, an insurance point arising out of the construction of Clause 22 of the contract. They broadly succeeded at first instance when the matter was heard as a preliminary issue, but lost on appeal.
- At the time of the quantum trial SCL had effectively accepted liability as noted in the liability judgment:
"SCL do not formally admit a breach, but as is made clear in the written opening did not lead evidence to contradict the assertion the slab was defective or the conclusion the defective condition was caused by a breach of contract. Neither did they challenge the appropriateness of the remedial scheme proposed by Egger on the advice of their expert consultant Mr Walsh."
- By the time of the quantum trial the claim was quantified detailing investigation, costs consultants advice on remedial works, the fee for the consulting engineer, items of consequential loss and in relation to the cost of repair or replacement of the slab no figure was given save the acronym TBA.
- Egger were still considering a repair option but it became apparent that works had not been carried out and SCL were sceptical as to whether they would be pursued.
- By November 2002 it was apparent that the replacement of the floor would probably be the most economic solution and tender documents were sent out to this end. The pleadings at this stage indicated a degree of flux, a claim value for replacement of £1.585 million was revised downwards to approximately £1.3 million and SCL were understandably concerned about the scope of the work envisaged, the reasonableness of the scheme and the duty of Egger to mitigate its loss.
- At the beginning of trial SCL expressed concerns about the degree of the completeness of disclosure in relation to this aspect of the counterclaim. Disclosure was sought (inter alia) of information relating to the design of the floor slab. During the course of the trial documentation was provided on a rolling basis by Egger relating to the replacement works and the costs of managing the disruption.
- It is clear that the additional material caused SCL a great deal of intensive labour in dealing with Egger's evolving case, both as to the design of the slab, the timing and cost of the works and the consequences of disruption, particularly consequential loss.
- In its closing quantum trial Egger sought £1,412,489 based upon their letter of intent. There followed detailed analysis as to why this sum, which was still to be expended, should be awarded.
- Post-trial Egger and SCL agreed to lodge further documents to the court. It became evident that works had not been carried out as indicated in the tender documents and that the works had been completed within a much shorter time scale than envisaged.
- The draft judgment was handed down on 31 October 2003 on the basis that the work was prospective. The claim in respect of remedial works was valued at £1,348,730 and consequential loss at £280,000 approximately 20% of the latter head of claim.
- Post judgment there was further disclosure of documentation by Egger to SCL and by 10 December 2003 Egger requested the claim be assessed on the basis of actual cost. A final account figure for the remedial works was to be available at some time before 16 February 2004 but it was not provided until a later time. In the quantum judgment it was said:
"In my judgment the starting point must be 22 March 2002 when SCL accepted that there was no defence to this claim. They actively pursued their insurance defence through first instance and in the Court of Appeal. Egger were entitled to prioritise their capital expenditure and put up with a bad job with a far from ideal warehouse floor, using steel plating to cover the cracking until some assurance was forthcoming that SCL would and could meet its obligation enabling remedial works to be put in hand. SCL of course were contractually obliged to design and construct a floor with a 25 year life span. So far as delay is concerned the clock did not start to tick until 22 March 2002. I am satisfied that the steps taken by Egger to cost and formulate a remedial scheme in the circumstances of this litigation are reasonable where most matters of substance have been the subject of heated contention. There is no evidence that would impel the conclusion that Egger did not intend to carry out the remedial scheme designed by Mr Walsh. I am persuaded they will. There is no failure demonstrated by SCL that Egger have failed to mitigate its loss."
- Once Egger pleaded its claim on actual costs it was largely a quantity surveying exercise to assess the appropriate award for the remedial scheme. Disclosure was piecemeal and dilatory nonetheless. It should have been disclosed that the resident engineer had left the site by the end of July and works completed months ahead of schedule.
- At the end of the quantum trial both parties proposed detailed extensive submission as to the appropriate sums to be allowed in respect of the floor slab. SCL addressed in detail the legal status of the hypothetical claims, the intention of Egger to carry out the works and the basis on which damages would be assessed.
- SCL submitted that Egger's failure to finalise the basis of its counterclaim had resulted in considerable additional expense no part of which lay at SCL's door. In relation to the costs of the quantum trial it was submitted that this was wholly unnecessary once Egger changed its approach again to pursue a costs based claim. Mr Williamson QC submitted that:
"There was no justification for Egger being awarded the cost of the trials on this issue: Egger's costs should be limited to those incurred after 10 December 2003 when it was finally decided the basis of the claim it wished to pursue. Such an award reflects the unnecessary costs that SCL were forced to incur in an ever changing claim and the court time spent dealing with the matter."
- Egger submit that they had a substantial money recovery which had been agreed between the parties in the sum of £956,370. With the other claims under this head taken into account Egger recovered a total sum of £1,171,237 represented to be 87% of the amount set in the original counterclaim of October 2000.
- After March 2002 liability ceased to be an issue. Before March 2002 it would have been prudent to consider the question of remedial works.
- In the event the agreement by the parties to proceed on an actual cost basis has been to the benefit of SCL. Valid criticism attaches to Egger for their failure to formulate their quantum claim for remedial works in a timely way and also for their continuing neglect to fulfil the duty of candid disclosure in a systematic and diligent way in relation to this issue.
COUNTERCLAIM B: SITE DRAINAGE AND EFFLUENT TREATMENT
- Egger were awarded £585,553. The original claim was for £580,000 which rose to £619,939.
- SCL challenged the amount of the claim appropriated to Mr Dent's fees and there was also an issue as to the requirement for a Sequencing Batch Reactor. Both were properly arguable matters.
- At the quantum trial Egger's valuation was accepted as the basis of the award. Egger's claim succeeded in its entirety save for the marginal Dent element of the claim.
COUNTERCLAIM C: SPOIL REMOVAL
- This counterclaim has a counterpart in Claim H1 where the findings in the liability judgment referred to earlier apply in relation to the counterclaim.
- At the quantum trial two issues were raised: the volume of spoil for which SCL were liable and the appropriate rate for removal. It was concluded that:
"There are 47,500 m³ of surplus soil to be removed from the north site. This is the quantity ascertained by the Barr and Raynesway Contractors approach to quote for the removal of this spoil in September of 2002. Of this, 6,350 m³ is over burden, present before SCL began to deposit spoil.
A further 7,670 m³ is necessary to achieve a site level of 134 AOD. SCL's original obligation was to achieve 134.5 AOD. Egger say that at the end of the second post tender meeting on 17 April 1997 SCL took responsibility for the problem of methane and the lowering of the floor level to 134 AOD suggested. The acceptance for the responsibility of the methane problem did not make a general variation of the level requirement.
There is a level of 233 m³ to the south of phase 2 which is of hard core put down as temporary hardstanding as the contractors compound for which SCL will be entitled to payment for removal. These three volumes should be deducted from the 47,500 m³ leaving a net amount to SCL's account of 31,447 m³. There is no evidence that Lymburn spoil is part of this quantity. The cost of removal as at September 2002 was £7.90 per square meter. Had this spoil been removed in June 2000 it could have been removed at a rate of £4.40 per cubic meter. It is not clear however whether this latter figure was in addition to landfill tax. Egger is criticised by SCL for not undertaking the removal of this spoil then. Mr Gardner on behalf of Egger explained that its removal was not an operational necessity or a financial priority at that time. Its removal is relevant to the prospective future development of land within phase 2. The costs of its removal was part of the original bargain. SCL's failure should not drive Egger's proper commercial priorities. Egger nonetheless have a duty to mitigate. They may never seek to develop the land but for cosmetic or environmental reasons such as SEPA requirements they may choose to remove the spoil. In my judgment the proper rate here is £7.90 per cubic meter which gives a cost of £248,431."
- There were respectable arguments in relation to both questions. Egger were nonetheless the overwhelming victors.
COUNTERCLAIM D: WATER INGRESS TO CHIP GRADER BUILDING
- The claim was originally pleaded in the sum of £53,905 in October 2000.
- Egger were successful on the issue of liability at the liability trial. The sole issue was the extent of the insurance obligation under Clause 22 which was decided by the Court of Appeal on the appeal as to the preliminary question relating to the warehouse floor slab.
- At the quantum trial the evidence of Mr Garrett, an in-house electrician, was relied upon. Mr Garrett identified an increase in the quantum of the claim to £177,261, material charges had increased from £9,400 to £37,192 and labour charges astronomically rose from £18,400 to £116,163.
- Mr Simper, Egger's quantum expert, was candid and said he was unable to check the reasonableness of the labour and material charges. Mr Wishart on an arithmetic basis, and subject to proof, assessed the expenditures to be recovered at £169,972.
- Two difficulties arose. Firstly it seems that the cable records as to rooting were stored on a computer which was stolen during the construction and physical records relating to rooting went missing together with the sub-contractors labour records. Furthermore it appears that the individual lines were never colour coded in accordance with good practice and thus the labour cost of tracing the roots and types of lines became very costly.
- A great deal of time was occupied in testing Mr Garrett's evidence and Egger had no option but to try and fill the gaps that appeared in the paper trail for this claim with considerable additional disclosure.
- Egger claimed £123,904 of the original claim representing a recovery of 70%. There are two salient features of this claim. Firstly it was swiftly and steeply increased within a very short time before trial and Egger failed to approach the proof of the major elements of the claim in a systematic and timely way thus leading to greater court time being spent upon the determination of the issue and much greater time and expense in defending and investigating the claim.
COUNTERCLAIM E: FENCING
- This claim by Egger was for the cost of fencing the site to the south of the factor site and was pleaded in the sum of £90,515.
- The evidence at the liability trial was supported by Mr Gardner and Mr Dent. Somewhat bullishly Mr Gardner contended that whilst the south site did not form part of the project site at the time of the contract it was nonetheless known that it would be acquired and that this obligation was within the Employer's Requirements.
- The liability judgment concluded:
"No witness evidence has been served by Egger to the effect that the subject of fencing to the south site was ever discussed. No witness evidence had been served by Egger to support the contention that there was an express term of the contract that SCL would provide fencing to the south side. Egger did not explore this matter with any of the SCL witnesses.
… The provision of fencing to the south side was outside the original scope of works agreed between the parties. The cost associated with the provision of fencing to the south site cannot arise from any breach on SCL's part because there is no contractual obligation to provide fencing in the first place. The cost of fencing eventually erected was a cost that Egger were liable to pay in any event. I reject this claim.
This is clearly a claim which had no real prospect of succeeding and nonetheless was pursued irrespective."
COUNTERCLAIM F: LANDSCAPING
- Egger's claim for £16,121 related to the cost of landscaping the north site. Egger relied on the evidence of Mr Gardner and Mr Dent. SCL by its defence contended that this obligation was never part of GMP.
- The liability judgment said that:
"458. Mr Dent in cross examination accepted that this drawing had been produced between the first and second post tender negotiation meetings and that it contained different and more detailed landscaping information than the earlier drawing. More importantly, however, he accepted that it was not a contract drawing and was not incorporated into the contract by reference to any other document.
Any case based upon an obligation to landscape in accordance with that drawing clearly has no merit."
- Egger submit that not a great deal of time was occupied in court on this issue.
- There was no warrant for bringing this claim.
COUNTERCLAIM G: SECURITY BARRIERS
- Egger's claim was for £12,663 in respect of the installation costs of security barriers and associated ducting and control systems.
- The liability judgment concluded:
"In evidence Mr Gardner accepted that once the correspondence was put to him, that a response from Egger was required to allow SCL to proceed and no such response was received by SCL. In consequence SCL did not act in breach of contract by not installing the barriers. They were prevented from acting in accordance with the contract because Egger failed in a timely way to reply to quite reasonable queries raised in correspondence and to co-operate."
COUNTERCLAIM H: MINOR CLAIMS
- These fell into two categories: Mechanical and Electrical claimed in the sum of £252,074 and Building and Civils claimed at £49,790. Mechanical and Electrical items relate to 89 pleaded breaches of contract.
- In accordance with the protocol agreed between the parties the only items in excess of £10,000 were dealt with at the liability trial, only item 85 fell into this category. Loss of production was established and since this was covered by insurance only the excess of £2,500 was recoverable.
- At the quantum trial the claim was largely resolved by expert evidence. The experts joint statement records agreement relating to the majority of items.
- SCL submit that 15 items only required decisions by the court, the relevant value of which amounted to £113,735 or 45% of the claimed value.
- The Building and Civil minor items claimed at £49,790 led to an award of a mere £250. There was no substantiation for these claims but nonetheless they had to be dealt with, investigated and formally defended.
- Egger's own quantum expert Mr Simper remarked in his report that it was very difficult to give an objective opinion on repair and rectification works based on estimates that appeared to be two years old and where the work had yet to be undertaken. He commented that in any event he had not inspected the work to be carried out.
- It appears that SCL were put to unnecessary work and expense in dealing with this substantial body of vague claims.
COUNTERCLAIM J: LIQUIDATED AND ASCERTAINED DAMAGES
- Egger's counterclaim sought damages under two limbs of Clause 24:
Clause 24(2)(a) 4 August 1997 to 20 November 1997, 136 days at £3,000 per day … £408,000
Clause 24(2)A(a) 8 September 1997 to 15 June 1998, 280 days at £3,000 per day … £840,000
Total £1,248,000
- SCL's defence was to take a contractual point on notice and to recite the entitlement to an extension of time as particularised in its particulars of claim. At the liability trial Mr Dent in his evidence concluded that a mere 2 weeks extension of time was the maximum entitlement of SCL. Egger's analysis was superficial and made no reference to contemporaneous documentation save some of Mr Dents own letters. SCL gave repeated notices to Egger of the delays they were suffering from late release of information and clashes with the process contractors. Numerous applications for extensions of time were sought by SCL from Egger, but Egger did not determine the date of practical completion during the currency of the contract or when SCL were present on site.
- On 3 July 1998 in response to SCL's request for a certificate of completion Mr Dent wrote to SCL stating:
"Whilst we are indeed considering the matter of Practical Completion we are doing so on a Section by Section basis. To suggest as you do that Practical Completion "on the project as a whole" has been achieved is farcical."
- Egger nonetheless were able in their letter of 6 July 2000 to assert that Practical Completion had been achieved on 15 June of 1998 three weeks before the letter dismissing the notion as farcical.
- In the liability judgment it was noted that:
"Egger were the contract administrators and that duty devolved on Mr Dent. I have some sympathy with Mr Dent who operated as a one man band with it seems, inadequate, administrative backup. As Project Manager, his hands were full to overflowing. As Mr Johnston for Turner & Townsend deposed in evidence he was often hard to find. He failed to attend essential meetings, particularly during December, January and February. He also had to act as the contract administrator, which called for a fair impartial view of matters. As I observed him in the witness box over many days, I came to the view that he was incapable of viewing things other than as an Egger company man. It is clear that he got considerable support from Mr Gardner. This project was Mr Gardners last project and he in turn it seems had sold it to Egger on an optimistic fixed price basis, without fully considering the risk that any reconsideration of objectives and changes of mind would lead to enhanced costs …
Strikingly, it seems that Mr Dent did not deal with applications for extensions for time during the currency of the work. There were many such applications made but he did not deign to produce a written report or carry out any contemporaneous calculations as to the claims for extensions of time. He never requested any further information in writing from the contractor or from Mott MacDonald the principal design sub-contractor or from the architects AJSB or indeed anyone else. It is clearly, from the evidence, and as he frankly admitted, that until the defence was served in these proceedings, he did not seriously address his mind to applications of extensions of time. There was a complete abdication by Egger of their responsibilities in this relation. Egger failed to properly administer this contract."
- I concluded that Egger's failure was deliberate:
"… because they were reminded on a number of occasions formally in writing of their obligation to consider extensions of time and they chose not to do so, they could have employed the expertise and resource of Turner & Townsend who were available to advise them on quantity surveying matters .."
- Reference was then made to the letter of 5 February 1998 marked for the attention of Mr Dent.
- During the course of the liability trial the paucity of evidence as to the effect of the late release of information and its critical impact upon the design and construction process became increasingly more apparent. Mr Dent on behalf of Egger gave evidence and attempted to fill these gaps. The breadth of his assertions, the detail of which was not originally given notice of warranted its responsive evidence from SCL. Mr Grodzicki and Mr Simpson made statements giving comprehensive and detailed information. Before that evidence was adduced SCL wrote to Egger an open letter dated 26 November 2001 in the following terms:
"It is SCLs strongly held view that Egger have failed, both during the currency of the works and in these proceedings to properly address questions of extensions of time. Egger's pleaded position, that SCL are entitled to almost no extensions of time is simply incredible.
We accept that, in principle, your Counsel are entitled to an adjournment to consider the further statements and then to cross-examine Messrs Grodzicki, Currie, Howlett and Simpson further.
However, we believe that on any fair assessment of the relevant factual material (it has been known to your clients since 1997) such an adjournment and further cross-examination are in fact unnecessary and pointless. The proper course is for your Clients to accept, albeit belatedly, SCL's entitlement to the pleaded extensions of time for zones B, C, D, E1, E2 and F3.
By this letter, therefore, we invite your client to adopt that course.
If they fail to do so we shall refer this letter on the question of costs. For the avoidance of doubt, our clients will be seeking a costs order on an indemnity basis in respect of the preparation of the supplementary statements, in the adjournment of the proceedings and any further cross-examination of the witnesses. All these costs have been or will be incurred due to the unreasonable approach of your clients to the relevant claims for an extension of time.
This is an open letter copied to Judge Wilcox."
- Egger did not accede to SCL's invitation. They had an adjournment and the evidence called was very substantial. In excess of 25% of the hearing was spent examining the liquidated damages claim and the extension of time claimed by SCL logically its counterpart. Had Egger dealt with these matters contemporaneously the real differences between the parties would have been addressed when those on site with clear recollections and a will to get on would have investigated the matters economically and agreed a solution or at least have narrowed the issues.
COUNTERCLAIM J: OTHER DAMAGES AND LOSS
- Egger claimed £80,828 based on the cost of employing Mr Dent for an extended period to deal with remedial works arising out of SCLs breaches.
- They recovered £28,000. There is a striking absence of documentary evidence to back up this claim. Mr Dent's diaries had been lost. It would have afforded a great deal of assistance to his recollection had they not gone missing and would have given an interesting insight into a very troubled project.
COUNTERCLAIM K: FIRE FIGHTING SYSTEM
- Egger's claim was advanced in the sum of £137,688. The claim was valued at £8,963 based upon a peripheral aspect of the claim. The principal claim on its merits did not succeed.
CONCLUSIONS
i) Significant H and L claims and items of counterclaim were inextricably bound up together.
ii) The conduct of Egger in relation to the administration of the contract and refusal to efficiently use the contractual mechanisms relating to claims is conduct that properly should be reflected in a costs order.
iii) The reactive conduct of SCL in presenting a grossly inflated account based on contract analogous figures whilst at one level understandable nonetheless must be condemned because it fed the suspicions of Egger and the behaviour of both rendered a negotiated settlement impossible.
iv) SCL's maintenance of some exaggerated claim figures was unattractive and significantly contributed to the climate of mistrust between the parties which in turn was an impediment to settlement.
v) SCL's stance in relation to the contract/no contract issue was unattractive. They lost that preliminary issue and a costs award has already been made in relation to it. In passing however it is proper to observe that it did not contribute towards further and future co-operation.
vi) Egger's conduct during the trial at times demonstrated an intransigence that serves to underline the inference that litigation to the end was the only way that SCL were able to recover certain monies. The late and unpleaded delay case as supported by Mr Pickavance exemplifies this.
vii) The over lengthy review of the H and L claims together with the counterclaim owes its genesis to the detailed analysis in Egger's submission on costs to which there were lengthy responsible submissions by SCL. No stone has been left unturned.
viii) No offers were made in this case under Part 36 or otherwise.
ix) From start to finish this case was about money:-
H Claims SCL's recovery:-
£3,499,339
L Claims SCL's recovery
| SCL recovery H claims |
3,499,339 |
| SCL recovery L claims |
1,881,273 |
| TOTAL |
5,380,612 |
| Less paid by Egger |
1,504,688 |
| |
3,875,924 |
| Plus interest to date of payment |
1,558,654 |
| (Including pence) |
5,434,579 |
| Less Part 20 counterclaim together with interest |
2,551,540 |
| SCL net recovery |
2,883,039 |
- The overall net winner was clearly SCL.
- The observation of Mr Davies that a punter would hardly risk £9 million in order to recover £2,883,037 because the odds would be stacked against him, has a certain resonance. However the Claimant is a public company that has a duty to its shareholders to recover its just debts. It could not have been foreseen even when this litigation was embarked upon that there would be no meeting of minds and no room for substantial compromise or the narrowing of issues.
CONCLUSIONS
- The proper costs order here after considering conduct before trial, at trial, the recovery on a component basis and overall and reflecting the Claimant's degree of success on the claim and the Defendant's success in relation to the counterclaim is to make a percentage order relating to the whole.
- I direct that Egger do pay the costs to be assessed or agreed not exceeding 55% of the total costs.
